A Primal Dispute: Is Amazon Too Big?
Amazon.com faces a landmark anti-trust lawsuit that could alter the landscape of Internet commerce
If you take advantage of the massive power Amazon.com offers to ecommerce merchants, take note. This blockbuster news may or may not impact you. Regardless, you should pay attention to the twists and turns of a civil anti-trust claim filed by the Federal Trade Commission against Amazon, alleging monopolistic practices.
It’s not just the FTC, through. Attorneys General from 17 states have joined in the civil action, bringing cases that allege Amazon’s formidable presence represents an anti-competitive entity that is harmful to both competitors and consumers. Though Amazon strongly denies the charges, you’ll want to understand what’s behind this development.
Amazon.com is light years from its humble roots as an online bookseller. Founded nearly 30 years ago by Seattle’s Jeff Bezos, it garnered negative press along with disapproval from fans of brick-and-mortar book stores alike. In what turned out to be a fait accompli, Amazon essentially led the charge of a burgeoning presence of ecommerce vendors weaving their way into the new normal for shopping in the 21st century.
Only Amazon went much farther. Discovering the power of Internet commerce, the company grew in unfathomable scope and began selling a wide variety of products. Fast forward to 2023, when there are few items consumers can’t locate on Amazon, thanks to a complex strategy that has increasingly involved third-party sellers.
Bezos goes Prime Time
Billionaire Jeff Bezos is mostly mum on the government’s lawsuit. After success with the Amazon platform, he’s branched out (bought the Washington Post newspaper) and is a mere figurehead of the Seattle ecommerce entity.
Once the iconic Amazon Prime program launched, a star was born, and the ability for sellers to get goods faster (even same-day delivery in some markets) and to take advantage of other benefits (digital content, streaming, music, and discounts at the other Amazon-owned ingenue, Whole Foods). Prime has spurred its own headaches, but that’s another story. A lucrative contract with the US Postal Service and UPS haven’t kept up with demand, and now Amazon uses contracted delivery drivers to pick up the slack. The result is mixed; delivery reliability is suffering in many cases, and some customers cite a reduction in product quality and difficult return policies from third-party sellers.
In what the FTC and states are characterizing as a “self-reinforcing cycle of dominance and harm,” the business model of Amazon does raise eyebrows. It’s no secret that the big players tend to apply pressure to stay on top, Amazon is accused of luring both sellers and buyers to its kingdom with underhanded and monopolistic techniques. Once sellers hop aboard the Amazon train to tap into a vast universe of eager buyers, the governments allege, it locks in contractual stipulations that set and raise fees, even punishing sellers who offer their inventory in other venues for a lower price.
The Pushback
Again, Amazon vehemently defends itself against these claims. It believes it serves both consumers and merchants by allowing them to tap into a massive marketplace where nearly limitless goods are available for mostly free shipping and quick delivery, and ecommerce sellers enjoy an audience reach it could only dream of in the past.
As Amazon suggests that regulators seem to misunderstand the nature of retailing, plaintiffs stand strong, citing negative impacts on other giants such as Walmart, Target, and the iconic Internet star, eBay.
Yet to be determined is whether the FTC and states envision a breakup of Amazon, separating its currently bundled functions to relieve the monopolistic impact they believe is continuing to the detriment of practically everyone. The lawsuit sits in a Seattle Federal courthouse, awaiting the arduous trail of motions and responses – or perhaps a settlement. Stay tuned.